Your business management can be improved through financial goals. Learn what they are, what they are for and how to set them for your company!
Managing a company is a task that requires constant attention, regardless of its size. When it comes to finances, every manager has the daily challenge of controlling cash flow , analyzing numbers and dealing with collection operations.
This management requires organization, which involves establishing clear financial goals. This makes it possible to assess the progress of the company’s activities and its results, as well as identify and correct errors.
In this article, you will see what financial goals are, what they are for, and how to set them. Enjoy reading!
What are financial goals?
Financial goals represent the steps that must be taken to achieve the objectives set for your company. They therefore function as indicators that will guide your business’ journey in the short, medium and long term.
Imagine that your company needs to generate 10% more profit in the next quarter. The intention is to strengthen the working capital reserve . To do so, you decide to invest in training courses to improve the performance of your sales team.
Next, you calculate the amount corresponding to the registration fees and conclude that, in order to finance them, you will have to reduce supplier costs by 5%. Now the order of goals that will lead to the achievement of your main objective becomes clearer.
Here’s an example of how goals can be defined:
- reduce expenses by 5% through renegotiations with suppliers;
- invest this amount in training at the beginning of the following month;
- set a two-week deadline for staff to attend classes;
- supervise employees to check whether their performance has improved;
- wait until the end of the quarter and check whether revenue has increased by at least 10%;
- allocate this amount to the capital reserve.
In this sense, financial goals include saving capital, investing in enrollments, increasing revenue and allocating cash to the reserve.
What are financial goals for in your company?
As you can see in the example, financial goals are used to help you manage your business . This is because they are tools that make planning easier.
Furthermore, it is possible to use them as a map in case the objectives are not achieved. By recognizing all the steps, it is easier to check which stage was not met and impacted the processes. From then on, it is possible to make optimizations to improve future results.
Financial goals also help you understand the current state of your business. This is essential for establishing more realistic goals. This way, you can calibrate expectations and requirements regarding team management .
Furthermore, meeting goals can increase employee engagement, which benefits the business. After all, a united team tends to achieve financial goals, such as increasing net profit and making the company more competitive over its competitors.
How to set your business’s financial goals?
Now that you know what financial goals are and what they are for, it’s time to learn how to set them. To do this, you can adopt important criteria that make this step easier.
Check it out!
Set clear deadlines
When defining what results are desired for your company, it is essential to consider the impact of time on processes and objectives. By setting deadlines for goals, employees can feel more motivated to achieve them.
Be realistic
As you have seen, it is necessary to create expectations that are consistent with the current phase of your company. Only then will it be possible to evaluate your team’s performance fairly and make better decisions.
For example, it is not possible to expect five employees to deliver the same results as a team with twice as many members. Therefore, unrealistic expectations will be difficult to meet, which could leave your employees discouraged and compromise their engagement.
Be specific when setting financial goals
When considering the SMART goals method, for example, it is necessary that they meet certain criteria. In this case, the definitions must be specific, measurable, achievable, relevant and time-bound.
So far, you’ve seen how to make them timely and achievable, but you still need to think about the other three criteria. To do this, you can use some examples to understand which indicators might make sense in your planning .
This is the case of focusing on reducing expenses and increasing revenue. This type of goal is relevant because it increases net profit, but it is also specific and measurable. Another possibility is to define a specific reduction in manufacturing costs to make the selling price of products more competitive , for example.
As part of financial management, it is also possible to set goals related to paying off the company’s debts. In addition to these examples, there are many other options to include in your plan, depending on the needs of the business.
Perform constant monitoring
As you may have noticed, goals work like sections of a map leading to a specific destination. However, in addition to defining them, it is essential to monitor your team’s work to see if the results have been achieved.
To do this, constantly monitor your company’s performance. This way, you can correct mistakes along the way and increase your chances of achieving your financial goals .